How economic policy uncertainty affects the cost of raising equity capital: Evidence from seasoned equity offerings

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8 Citations (Scopus)


Economic policy uncertainty (EPU) increases the cost of raising equity capital, especially when the economy is weak. A one standard deviation increase in the EPU index developed by Baker, Bloom, and Davis (2016) is associated with a 43 basis point increase in the price discount of seasoned equity offerings (SEOs) during the 2000−2014 period. The cross-sectional analysis shows that the EPU effect on SEO discounts is stronger for firms with greater dependence on government spending, less informative stock price, or a smaller EPU beta. Moreover, there are fewer SEO activities in periods when there is a high degree of policy uncertainty.

Original languageEnglish
Article number100841
JournalJournal of Financial Stability
Publication statusPublished - Apr 2021


  • Economic policy uncertainty
  • Seasoned equity offerings
  • SEO discounts

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)

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